Do design features explain the volatility of cryptocurrencies?

Fabian E. Eska, Yanghua Shi, Erik Theissen and Marliese Uhrig-Homburg

Finance Research Letters, 2024, vol. 66, issue C

Abstract: This paper examines the impact of cryptocurrency design features on their return volatility. We compile a sample of 58 cryptocurrencies, adopt the taxonomy of design features proposed by Eska et al. (2022), and estimate LASSO regressions. We document that older cryptocurrencies tend to be less volatile. Networks with mandatory transaction fees, cryptocurrencies based on (delegated) Proof-of-Stake, and those developed by private for-profit entities tend to be more volatile. Furthermore, we provide evidence that networks passing transaction fees and/or tips on to verifiers are associated with higher volatility levels.

Keywords: Blockchains; Cryptocurrencies; Cryptocurrency design; Volatility; LASSO (search for similar items in EconPapers)
JEL-codes: G1 G2 O30 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:66:y:2024:i:c:s154461232400566x

DOI: 10.1016/j.frl.2024.105536

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